Jul 12, 2022 - News

Mass. House Democrats propose $523M in tax breaks

Illustration of a hundred-dollar bill breaking into smaller hundred-dollar bills.
Illustration: Brendan Lynch/Axios

Massachusetts Democrats announced an agreement to change the tax code Monday morning, but lawmakers have not finalized details on what the tax breaks would look like.

What's happening: House leaders broke down the specifics of their $523 million tax relief plan yesterday, but the Senate has yet to do the same.

  • A representative for Senate President Karen Spilka did not respond to a request for comment.
  • The proposed tax breaks are separate from the $500 million in rebates Democrats said they want to send taxpayers who earned between $38,000 and $100,000 in 2021.

Why it matters: Residents are feeling the effects of inflation and supply chain disruptions everywhere, from higher prices at the gas pump to steeper grocery and restaurant bills.

  • Democrats see the proposed changes to the state's tax code, along with the rebates announced last week, as the answer to rising costs.

Here's what the House tax relief plan includes:

  • The child tax credit would go up, from $180 per child to $310 per child, and get rid of the two-child cap.
  • Seniors would get a tax break of up to $1,755, from $750 currently.
  • Renters would see their rent deduction cap go up, from $3,000 to $4,000.
  • The state's earned income tax credit, which goes to low-income workers, would match up to 40% of the federal EITC, up from 30%.
  • Under the proposed state EITC increase, a family with three or more qualifying children would be eligible for up to $2,691.
  • Immigrants without legal status who file taxes using an ITIN would remain ineligible.

The House also wants to change the estate tax, which currently taxes people on estates they inherit valued at $1 million or more.

  • The House's plan would increase the threshold to $2 million, similar to what Republican Gov. Charlie Baker proposed in his own tax relief bill in January.
  • Massachusetts is one of 12 states with an estate tax, and one of the only ones with a "cliff effect." That means heirs whose estates are valued at just over $1 million pay for the entire estate's tax value, rather than just the amount past the threshold.
  • The House would eliminate the "cliff," so heirs paying taxes on estates that exceed the new $2 million threshold wouldn't be taxed on the first $2 million, Rep. Mark Cusack (D-Braintree), House chairman of the Revenue Committee, told Axios yesterday.

What they're saying: Rep. Buddy Williams (D-Springfield), House chairman of the Joint Committee on Racial Equity, Civil Rights and Inclusion, says the estate tax changes could help Black residents build generational wealth.

  • The current estate tax might take a small fraction of money from the state's wealthier, often white, residents, but they can mean a sizable loss for the state's low- and middle-income residents who inherit their loved ones' assets, meaning less money to save and pass onto the next generation, Williams said.
  • "That's just one step in a series of steps we have to take to start real wealth building, real sharing the pie … make it generational so they can pass it to the next generation," Williams told Axios in an interview. "That does not exist in most Black and brown communities."

Editor's note: This story has been corrected to note that Rep. Mark Cusack is from Braintree, not Norfolk.

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